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Elad Gil Shares Advice from the High Growth Handbook, a Guide to Scaling Startups
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Elad Gil - https://twitter.com/eladgil - is an entrepreneur, operator, and investor. He cofounded Color Genomics - https://www.color.com/ - and Mixer Labs. Worked at Google and Twitter. And has invested in companies including Airbnb, Coinbase, and Stripe. He just released the High Growth Handbook - https://www.amazon.com/High-Growth-Handbook-Elad-Gil/dp/1732265100/ - which is a guide to scaling startups published by Stripe Press - http://press.stripe.com/ It contains tactical advice on key issues for post product-market fit companies such as the role of the CEO, hiring executives, late stage fundraising, M&A, and other topics. It also includes interviews with people in tech, including Sam Altman, President of YC Group. You can find the High Growth Handbook on Amazon - https://www.amazon.com/High-Growth-Handbook-Elad-Gil/dp/1732265100/ The YC podcast is hosted by Craig Cannon - https://twitter.com/craigcannon We're accepting applications from startups for the Winter 2019 funding cycle. Apply here: http://ycombinator.com/apply Read the transcript here - https://blog.ycombinator.com/elad-gil-shares-advice-from-the-high-growth-handbook-a-guide-to-scaling-startups *** Topics 00:14 - Why should an entrepreneur read the High Growth Handbook? 4:45 - On Marc Andreessen's comment, "The companies that charge more tend to grow faster." 6:00 - Myths about startups 7:00 - Leon Coe asks - What types of businesses do you avoid investing in? 8:30 - Things to just say 'no' to 11:50 - Companies that may be too early 14:02 - On Naval Ravikant's comment, "The most successful class of people in silicon valley on a consistent basis are either the venture capitalists, or people who are very good at identifying companies that have just hit product/market fit. They have the background, expertise, and references that those companies really want to help them scale." 16:51 - On Claire Hughes Johnson's "Guide to Working with Claire" 18:50 - Masud Hossain asks - How did most of the companies you interviewed get their first 10 customers? 20:05 - Masud Hossain asks - Is content really king? 22:00 - Narayan Mallapur asks - Where do founders make the most mistakes? Is it on hiring? What steps should they take to avoid these pitfalls? 24:05 - Brianne Kimmel asks - What are some lessons learned in highly regulated sectors? When should you hire a General Counsel? How do you prioritize public policy and lobbying efforts? 28:15 - Media cycles 30:05 - Marius Chawa asks - What are the top three things a startup "must" achieve before VC firms would line up to fund them? 33:55 - Taylor Caforio asks - My company is at our early MVP stage. What is he best way to find a balance between giving our earliest customers the 6 star treatment while also having swift and exponential growth in the back of our minds. 36:04 - Tanmay Khandelwal asks - When you are sprinting in growth stage, how do you predict engineers required and hire accordingly? 37:51 - TD Bryant II asks - When your organization is experiencing exponential growth, how do you choose which functions to outsource vs build/hire? 41:00 - Andrew Pikul asks - Who is your favorite Dragon Ball (Z/GT/Super) villain?
Segments Timeline
Why Read the High Growth Handbook?
Elad Gil discusses the universal principles found in the High Growth Handbook, emphasizing its relevance for entrepreneurs at various stages. He highlights key topics such as hiring practices, M&A insights, and product management best practices, making it a valuable resource for anyone involved in high-growth companies.
"the first question I wanted to ask you the book is called high-growth handbook not not the high-growth hanjo just high-growth handbook given that so few companies ever make it to high-growth you know ..."
The Meaning Behind 'Suddenly Everything is Possible'
Elad shares the inspiration behind the dedication in his book, referencing a poignant moment from Jonathan Safran Foer's work. He explains how the phrase 'suddenly everything is possible' reflects the limitless potential seen through the eyes of a child, and how this perspective influences his outlook on life.
"inspired you to shift this into a book rather than you know your own personal blog site you know SEO targeted sure content yeah I resume was thinking of doing it as a website and John Collison one of ..."
The Nature of Startup Advice
Elad reflects on the nature of startup advice, emphasizing that there is no one-size-fits-all solution. He discusses the importance of context in startup experiences and how different perspectives from various founders enrich the advice shared in the High Growth Handbook.
"is when you look at your child you realize that every possibility is suddenly ahead of them and there's a reinvention of life through that child in other words they could go and become an Olympic skat..."
Charging More for Faster Growth
Elad discusses Marc Andreessen's assertion that companies charging higher prices tend to grow faster. He explains how pricing power can lead to better margins, allowing companies to reinvest in growth and scale more effectively, challenging the common belief that lower prices always lead to greater market share.
"or they're like well in my case it really wasn't like that or you know the advice I give is a little bit different from that and I think that's actually great you know there it's almost like you're ba..."
Myths About Startups
Elad addresses prevalent myths in Silicon Valley regarding startup success, particularly the misconception that all markets are winner-take-all. He highlights the importance of understanding market structures and how they impact the viability of startup opportunities.
"that in general there's a set of myths that have built up over time in Silicon Valley around what is a great startup yeah and in the social networking era things really were winner-take-all because th..."
Investing in EdTech: A Cautionary Tale
Elad shares his perspective on investing in EdTech, explaining why he avoids this sector. He discusses the challenges of finding a viable payer in the education market and the structural issues that make it difficult for startups to succeed in this space.
"so you know I've never invested in a net tech company and again I think the social impact is massive I just think it's very hard to succeed in part because there's nobody who is able or willing to pay..."
The Challenges of Entering the China Market
Elad humorously reflects on the difficulties companies face when trying to enter the Chinese market. He discusses the importance of having a solid strategy and understanding local dynamics, citing examples of companies that have succeeded and those that have failed.
"great example where I think most of the interesting things in that market will come from large electronics players who can just integrate it into something and then distribute it versus a news for a o..."
The Symbolism of Chrome Pandas
Elad shares a light-hearted anecdote about Dropbox's giant chrome panda and its significance in the tech industry. He uses this example to illustrate the quirky and often humorous aspects of Silicon Valley culture while discussing the serious challenges of market entry.
"out literally an envelope with I think it was ten hundred dollar bills as sort of the annual bonus for everybody and the urban myth around it I don't know that it was actually true but the urban myth ..."
Timing and Market Readiness
Gil discusses the challenges of timing in the startup ecosystem, comparing current ideas in AR/VR and crypto to those from the late 90s internet bubble. He suggests that while some concepts may be too early, they could eventually lead to significant innovations, drawing parallels to past failures that later became successful companies.
"tired yeah okay I have never lived through one of those but it sounds terrible I don't think anybody in Silicon Valley in this era has because we've been in an eight-year bull market yeah so obviously..."
Identifying Breakout Companies
Elad Gil elaborates on how to identify companies that are on the verge of breaking out. He highlights key signals such as customer traction, the network surrounding the company, and fundraising activity. Gil emphasizes the importance of joining companies at the right stage for maximum growth potential and financial upside.
"think most of it is too early and I do think it will eventually happen so yeah I think the other area is actually in crypto so I actually think there's a great analogy between the cryptocurrency world..."
Best Practices for Founders
Gil shares insights on best practices for founders, inspired by Claire Hughes Johnson's innovative onboarding letter at Stripe. He discusses the importance of clear communication styles and expectations in high-growth companies, advocating for transparency in personal quirks to foster better collaboration and efficiency.
"how do you find those companies yeah I think there's a few signals that a company is breaking out and the point of the quote from Anibal there's a few people have been very good at that for example Ma..."
Gaining Initial Customers
In response to a question about acquiring the first ten customers, Elad Gil explains that the approach varies significantly by company. He emphasizes the importance of understanding different strategies and tactics that successful startups have employed to build their initial customer base.
"the organization what I think everyone should do it at every company yeah I think it's such a great idea it's like you can't well it's not totally fair to rely on everyone to be able to read everyone ..."
Content as a Growth Strategy
Elad Gil addresses the question of whether content is truly king in driving growth. He explains that while content can play a role, the effectiveness of growth strategies varies by product type. Gil emphasizes the need for aggressive distribution tactics, citing examples of successful companies that prioritized early and effective marketing efforts to achieve rapid growth.
"differs a lot by company and so some companies will literally go and just hand recruit those first ten people to use their product and you know the founders are stripe were famous for anytime they'd m..."
Common Hiring Mistakes
Elad Gil discusses the prevalent mistakes founders make regarding hiring, particularly in early-stage companies. He notes that many entrepreneurs struggle with raising the right amount of capital and making poor hiring decisions. Gil emphasizes the importance of having a solid selection process and the necessity of letting go of underperforming employees to build a strong organization.
"depends on what you're doing if you're building a consumer social product then there's probably mechanics built into the product itself that cause it to spread so sometimes things spread a bit organic..."
The Balance of Hiring and Firing
Continuing the discussion on hiring, Elad Gil elaborates on the balance between hiring well and firing effectively. He shares insights on how companies like Google and Facebook approached these challenges differently, highlighting the importance of rigorous hiring practices and the need for timely firings to maintain a productive workforce.
"people create in the content category they're often playing the game that whatever system they're on wants them to play and and that's good to a point but you're like it's hard to achieve outside rewa..."
Navigating Regulation in Startups
Elad Gil provides advice on how startups should approach regulatory compliance, particularly in highly regulated sectors. He discusses the timing of hiring a general counsel and the importance of prioritizing public policy efforts. Gil suggests that companies should educate stakeholders about their industry to foster understanding and support.
"people right it's the company who has a thousand people and you're like wait a second can are we like 500 jobs right now yeah yeah I think it's tough do you have a do you have like a ballpark number f..."
The Role of Public Policy in Growth
In this segment, Elad Gil emphasizes the significance of public policy and lobbying for startups as they grow. He argues that many companies wait too long to engage in these efforts, which can hinder their success. Gil encourages early conversations with relevant stakeholders to ensure that the company's narrative is understood and supported.
"efforts I think it depends a lot on the sector that you're in so some companies will actually hire a compliance person or a general counsel very early when base is an example of that where they hired ..."
Optimism in Silicon Valley
Elad Gil reflects on the changing sentiment in Silicon Valley, noting a decline in optimism about the future of technology. He argues that technology has the potential to be a force for good and expresses disappointment over negative narratives from former employees. Gil advocates for recognizing the positive impact of technology on society and the importance of maintaining a hopeful outlook.
"supportive and cinnamon tagging istic mm-hmm do you have opinions on the ad campaigns Facebook's running right now to kind of like say hey we're sorry and we're not about fake news I haven't seen thos..."
Media Cycles and Redemption Stories
Gil explains the cyclical nature of media coverage in Silicon Valley, where companies experience periods of hype followed by criticism and then redemption. He highlights the importance of maintaining a positive outlook on technology's role in society and the need for companies to correct their mistakes while continuing to innovate.
"no but being here I'm more optimistic than ever there are so many cool things happening it's just tricky I mean I know it from talking to my family on the East Coast who isn't you know connected in th..."
Surrounding Yourself with Positivity
Elad Gil shares insights on the importance of surrounding oneself with positive influences, especially for founders. He recounts a story of a founder facing skepticism from peers about their ambitions and emphasizes the need for supportive voices in the entrepreneurial journey.
"into the redemption period yeah I I think technology is probably going to be whipped a little bit more in the next election cycle because it's like a very obvious target it seems unfortunately especia..."
Key Metrics for Startup Funding
In response to a question about startup funding, Gil outlines the top three things a startup must achieve to attract investors. He emphasizes the importance of having a high-margin, rapidly-growing product, being in an exciting market, and having a strong team, while also noting that compelling storytelling can play a crucial role.
"alright let's go to another question so Marius Chawla asks this is such a common question what are the top three things a start-up must achieve before VC firms or say an angel investor would line up t..."
Alternative Paths to Success
Gil discusses the misconception that venture capital is the only way to build a successful business. He shares examples of companies that have thrived without significant outside funding, encouraging entrepreneurs to explore various funding sources, including customer payments and bootstrapping.
"don't know often times I've talked to a Michael Seibel who's written a lot about this companies come to him and they're like oh we need to raise a Series A right now mm-hmm and unfortunately they have..."
Balancing Customer Care and Growth
Elad Gil provides advice on how startups can balance providing excellent service to early customers while focusing on growth. He emphasizes the importance of delighting a small number of customers to create advocates, while also allowing room for experimentation and learning from mistakes.
"better for founder's in terms of where you end up oh definitely I think way too few people think about what game they're about to enter when they even just start thinking about ideas because if you th..."
Navigating Growth Stage Hiring
In response to a question about hiring during rapid growth, Gil discusses the challenges of predicting engineering needs and hiring accordingly. He highlights the importance of being adaptable and responsive to the evolving demands of a growing startup.
"things and you know Reed Hoffman used to have this great quote that if you aren't embarrassed by your first product you waited too long to launch it yeah now he qualifies that depending on what you're..."
Outsourcing vs. Building Functions
Elad Gil explores the decision-making process behind outsourcing versus building functions within a startup. He highlights that the choice depends on the company's objectives and industry context. Gil provides examples, such as Instagram's lean team during its acquisition, and discusses when to hire specialized roles like General Counsel in regulated industries.
"related to that there's a question about hiring from 10 may condo wall they ask when you're sprinting in growth stage how do you predict the engineers required and hire accordingly yeah there's sort o..."
The Maker Mindset in Startups
In this segment, Elad Gil critiques the 'maker mindset' that often leads founders to reinvent processes unnecessarily. He advises startups to leverage existing solutions for functions like sales and benefits, rather than trying to innovate everything from scratch. Gil stresses the importance of focusing on core business needs while keeping the work environment engaging.
"and so I think it really depends a bit when all is said it done you know I can't think of very many functions that you want to outsource I think there are aspects of functions that you want outsourced..."
Favorite Dragon Ball Villain
Elad Gil shares a light-hearted moment discussing his favorite Dragon Ball villain, revealing his preference for Naruto's Itachi Uchiha. He reflects on the character's complexity and the challenges of choosing an avatar for social media. This segment showcases Gil's personality and interests outside of the startup world, inviting audience engagement.
"innovate everything and you don't have to innovate yeah yeah there's actually a great I think I carries a blog post or podcasts on the end recent site where they talked about how technical founders al..."